This application relates generally to medical savings accounts. More specifically, this application relates to mechanisms for funding medical savings accounts.
There are currently a variety of different types of medical spending accounts. These different accounts are managed in different ways and are generally used for different purposes, but have as a common factor that they permit funds to be applied with certain income-tax advantages to pay for certain healthcare expenses. As used herein, “healthcare” expenses include a broad array of expenses that may arise in the course of diagnosing, preventing, curing, or treating any disease that affects any part or function of the human body. They may include expenses related to teeth or other oral structures in the form of dental expenses, and may include expenses related to the eye and other ophthalmic structures in the form of vision expenses. Healthcare expenses may include service fees paid to physicians, dentists, optometrists, nurses, or other medical practitioners, service fees paid to laboratories that perform analyses of blood or other tissues, or that operate diagnostic equipment like x-ray machines, magnetic-resonance-imaging machines, and the like. Healthcare expenses may also include costs incurred to purchase, rent, or lease a variety of products used for healthcare. Some examples include hearing aids, crutches, prescription (and sometimes nonprescription) drugs, artificial limbs, and other prosthetic devices, orthodontic braces and other appliances, service dogs, oxygen supplies, and so on. These examples are merely illustrative since there are many other examples of healthcare expenses.
Different types of medical spending accounts available for these types of expenses in the United States currently include flexible spending accounts (“FSAs”), health reimbursement accounts (“HRAs”), and health savings accounts (“HSAs”), and may include other types of medical spending accounts that may be developed in the future. FSAs are financial accounts that are established as part of employer-sponsored benefits plans. Employees are able to contribute a set annual amount to the accounts, usually of part of a regular salary deduction that is applied to each paycheck. The employee is then able to spend the funds from the accounts to pay for healthcare expenses. Often the annual amount can be spent before the employee has completed making the contributions, permitting payment for healthcare expenses effectively to be made on an interest-free credit basis. Because contributions to the accounts are made as a salary reduction, they are also not subject to income tax.
HRAs are financial accounts having funds that are set aside by employers to provide reimbursement for employees who incur medical expenses. The funds can be rolled over from year to year. Because they are funded by the employer rather than the employee, the tax advantage for such accounts is enjoyed by the employers, who qualify for preferential tax treatment in a manner similar to employers who fund insurance plans.
Of particular interest are HSAs, which are financial accounts that are intended to provide for payment of unreimbursed medical expenses incurred by those who are self-employed or employed by a small organization (fewer than 50 employees). One qualification requirement for such accounts is that the employee be covered by a high-deductible insurance plan. Funds in the account can be used on a pre-income-tax basis and may earn tax-deferred interest. Like HRAs, the funds in HSAs are available to be rolled over from year to year if they are unused.
Medical spending accounts in which funds are maintained in investments have the difficulty that the value of the investments needs to be converted to cash for them to used in supported payment of healthcare expenses. There is accordingly a need in the art for improved methods and systems of using funds in medical spending accounts.